Question

Which of the following statements is true of activity-based costing?

Multiple Choice

• ABC ignores the allocation of marketing costs.

• ABC classifies some indirect costs as direct costs. products.

• ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products.

• Activities are the cost objects of the second stage of ABC.

Production costs per tennis racket total $ 38, which consists of $ 25 in variable production costs and $ 13 in fixed production costs (based on the 6,000 units produced). Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.

Answer 1

1]	Which of the following statements is true of ABC?
	*ABC classifies some indirect costs as direct costs.
2]	Sales	$      4,41,000
	Variable expenses:
	Production cost [4900*25]	$      1,22,500
	Selling and administration [75000*10%]	$           7,500
	Total variable expenses	$      1,30,000
	Contribution margin	$      3,11,000
	Fixed expenses:
	Production [6000-13]	$          78,000
	Selling and administration [75000*90%]	$          67,500
	Total fixed expenses	$       1,45,500
	Net Income under variable costing	$     1,65,500